Buy-side traders called for an electronic bond trading system with centralized information and greater price discovery at a recent Bond Market Association conference. While emphasizing that electronic systems will be slow to encompass the fixed-income market as a whole, panelists nonetheless described the need for a multi-dealer system that includes a wider range of debt instruments for trading.
The panel of portfolio managers emphasized that they are being bombarded with information from multiple broker/dealers on a daily basis-information that they need to be able to access easier and faster. "It's not very difficult to envision a technology that does what the Street is reluctant to do, which is basically aggregate that information into one format that we can use more productively and efficiently," says Tom Sorell, vice president of fixed income at Guardian Life.
Of the four panelists present, three were currently using at least two electronic trading systems and all confirmed the increased efficiencies and cost reductions of utilizing such systems. While the trend toward electronic execution continues to move forward with increased volume and technology, the panel did not foresee the demise of the broker/dealer community any time soon. "I don't envision a world without dealers, they just will add value in a different kind of way," notes Sorell, who was joined on the panel by Paul Selian, senior portfolio manager at Aetna Investment Management Group; Russ Shariff, senior vice president/portfolio manager at Weiss, Peck & Greer; and Gary Zeltzer, senior vice president at J & W Seligman and Co.
The panelists agreed that electronic trading volumes will continue to increase and so too have the number of systems catering to the bond market. Indeed, the Bond Market Association's third annual survey of electronic trading systems found that the number of firms offering electronic transaction services has reached 39, up from 26 last year and 11 in 1997.
"The sum total of factors driving the increase in numbers of electronic systems is obviously the Internet and its impact on the way the financial markets are doing business," says Andy Nybo, vice president, director of research for the Bond Market Association. He estimates that currently around 6% of the volume on the institutional wholesale market is electronic with developments in technology, lower costs of communication and growing system compatibility fueling that growing percentage.